The High Income Fund distributed 9 cpu in September. The portfolio has been restructured in order to continue to produce a relatively high and consistent distribution. In addition to the cash and premium NCD instruments, the portfolio now includes corporate debt, preference shares and inflation-linked bonds.

Corporate debt provides a higher yield than cash and the additional risk has been managed by loaning only to those companies in which Marriott is currently invested in our equity and property portfolios.

Listed preference shares also provide a relatively high yield with the opportunity of capital gain should these current yields return to their lower long term averages. Inflation linked bonds when linked with premium NCD's, offer higher levels of income than cash as well as low capital volatility and a known real return (return in excess of inflation) if held to maturity.

The target asset allocation is:
o Floating rate corporate debt 20%
o Listed preference shares 10%
o Structured NCD's 30%
o Inflation linked bonds 20%
o Cash 20%

Property and long bonds yields are well below their historic averages and will only be included when the opportunity for capital gains outweighs the risk of capital loss. It must be noted that as the portfolio now includes instruments that are priced in the market the price of the units can now move up or down.

The effect of the September interest rate reduction will result in the yield reducing to 8.6%. Although it has become necessary to reduce the distributions, we are still confident that the asset allocation is appropriate and that the expected return remains between 7% and 9.5%. There has been capital appreciation from both preference shares and inflation linked bonds and we expect this to continue especially in the light of the recent interest rate reduction.

The High Income Fund distributed 9 cpu in June. The portfolio has been restructured in order to continue to produce a relatively high and consistent distribution. In addition to the cash and premium NCD instruments, the portfolio now includes corporate debt, preference shares and inflation-linked bonds.

Corporate debt provides a higher yield than cash and the additional risk has been managed by loaning only to those companies in which Marriott is currently invested in our equity and property portfolios.

Listed preference shares also provide a relatively high yield with the opportunity of capital gain should these current yields return to their lower long term averages.

Inflation linked bonds when linked with premium NCD's, offer higher levels of income than cash as well as low capital volatility and a known real return (return in excess of inflation) if held to maturity.

The attached pie chart shows the current levels of these instruments. The target asset allocation is:

o Floating rate corporate debt 20%
o Listed preference shares 10%
o Premium NCD's 30%
o Inflation linked bonds 20%
o Cash 20%

Property and long bonds yields are well below their historic averages and will only be included when the opportunity for capital gains outweighs the risk of capital loss.

It must be noted that as the portfolio now includes instruments that are priced in the market the price of the units can now move up or down.

The effect of the restructuring of the portfolio will result in income remaining at current levels until the end of 2010 with the possibility of limited capital loss or capital gain. If the Reserve Bank maintains the low interest rate policy for the remainder of the year, it is likely that the fund will be relatively capital stable and deliver a 9% net yield.

The High Income Fund distributed 9 cpu in March. During 2009, the portfolio was restructured in order to produce a relatively high and consistent distribution using a spread of deposits and premium NCD's. The yield investors received has been a consistent 9% net of costs, however there has been a capital loss of 2.7%. The net result is a return that equates to the money market average. Going forward It is our intention to replace the maturing deposits with the following range of instruments in order to maintain the 9% net yield with an expected total return of 7%- 9.5%. It must be noted that the portfolio now includes instruments that are priced in the market and can lose or gain in capital value :

o Floating corporate debt + CLN's 20% - 40%
o Listed preference shares 10% -20%
o Premium deposits 30%
o NCD's + cash 20%

Property and long bonds will only be included when yields reflect real value and an expectation of higher longer term inflation; this is currently not the case. The inclusion of quality listed corporate preference shares is a result of yields in the region of 8% reflecting valuable income streams. There is also now the potential for capital appreciation in the light of the new Reserve Bank Governor's stance on monetary policy. The above allocation has been made in the light of current interest rates, increasing inflationary pressures and the growing need for capital, both from government and the private sector. Credit exposure will be limited to floating corporate debt whose equity we are comfortable holding within other Marriott portfolios. Floating corporate debt and Credit Linked Notes offer a high degree of capital stability with an income stream linked to cash rates. Select listed preference shares offer relatively high levels of income, also linked to cash rates, with some capital volatility, both positive and negative but with a greater likelihood of capital gain in the year ahead as the yield spread relative to cash is high. Premium deposits offer relatively high levels of income with known levels of capital loss when held to maturity. The effect of the restructuring of the portfolio will result in income remaining at current levels until the end of 2010 with the possibility of limited capital loss or capital gain. If the Reserve Bank maintains the low interest rate policy for the remainder of the year, it is likely that the fund will be relatively capital stable and deliver a 9% net yield.

The High Income Fund distributed 9 cpu in December and is currently yielding over 9% The structure of the portfolio results in the production of stable distributions. Marriott feels that the effects of the recession on property values and bond prices will enable this portfolio to take advantage of lower priced income streams in time. Until this opportunity presents itself, a significant portion of the portfolio has been moved from very short dated deposits into twelve-month termed deposits. This has had the effect of locking in the yield while interest rates are low. The locking in period enables the portfolio to take advantage of any price weakness that may arise in real assets. As the portfolio moves into its next phase of the investment cycle, so too will the effects of some volatility in its price. As some of these instruments have been purchased at a premium, this will result in some capital volatility, with a maximum capital loss of 3% over the twelve-month period. As investors have enjoyed capital stability for the last two years, combined with high income distributions, this forecast of a high level of income, combined with income stability and a small element of capital volatility, remains very attractive.